$ 50 Billion Fraud In Largest Ponzi Scheme

[LaoPo]

On top of all the bad financial and economical news...now this:

Bernard Madoff arrested over alleged $50 billion fraud

Fri Dec 12, 2008 12:40am EST - By Edith Honan and Dan Wilchins

Bernard Madoff

NEW YORK (Reuters) - Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment.

"There is no innocent explanation," Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint.

The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.

U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million.

The Securities and Exchange Commission filed separate civil charges against Madoff.

"Our complaint alleges a stunning fraud -- both in terms of scope and duration," said Scott Friestad, the SEC's deputy enforcer. "We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors."

Dan Horwitz, Madoff's lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, "Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events."

A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, said Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors.

The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.

An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said.

The fund told investors it followed a "split strike conversion" strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity.

Jon Najarian, an acquaintance of Madoff who has traded options for decades, said "Many of us questioned how that strategy could generate those kinds of returns so consistently."

Najarian, co-founder of optionmonster.com, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.

"He always seemed to be a straight shooter. I was shocked by this news," Najarian said.

'LOCK AND KEY'

Madoff had long kept the financial statements for his hedge fund business under "lock and key," according to prosecutors, and was "cryptic" about the firm. The hedge fund business was located on a separate floor from the market-making business.

Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.

Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens.

The fraud alleged here could further encourage investors to pull money from hedge funds.

"This is a major blow to confidence that is already shattered -- anyone on the fence will probably try to take their money out," said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish.

Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.

Madoff remains a member of Nasdaq OMX Group Inc's nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell, according to the website.

The website also states that Madoff himself has "a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

-Bloomberg

LaoPo

[anneclayton]

"Bernard L. Madoff Investment Securities LLC is a leading international market maker. The firm has been providing quality executions for broker-dealers, banks, and financial institutions since its inception in 1960. During this time, Madoff has compiled an uninterrupted record of growth, which has enabled us to continually build our financial resources. With more than $700 million in firm capital, Madoff currently ranks among the top 1% of US Securities firms. Our sophisticated proprietary automation and unparalleled client service delivers an enhanced execution that is virtually unmatched in our industry.

Madoff Securities' clients include scores of leading securities firms, banks and financial institutions from across the United States and around the world. The firm is a leading market-maker in all of the S&P 500 stocks as well as over 350 NASDAQ issues. The firm is known for its fine pricing as well as its ability to execute most orders in seconds.

Madoff Securities' superior service is made possible by a sophisticated dealing staff backed by the securities industry's most advanced technology. It is underpinned by the personal commitment of founder Bernard L. Madoff and his brother Peter B. Madoff, who is the senior managing director. Their dedication to providing quality executions has enabled the firm to become a leader in the US "third market," which trades US listed equities away from the exchange floor. Madoff Securities is a registered US broker/dealer regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority, Inc.

In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door. Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark. "

SOUNDS GREAT, DOESN'T IT? It was an excerpt from the official Madoff's site.

When I read all the beautiful, glossy real estate materials in Pattaya in the last 6 months, I never stop thinking about the truth - THE PEOPLE WHO PUBLISH THEM ARE MANIPULATORS AND LIERS, GIGANTIC PONZI SCHEME ADMINISTRATORS who have no assets to cover the losses if worse comes to worst.

[lannarebirth]

Well, this news has about 5,000 other potential perp walk poster boys breathing a big sigh of relief.

http://online.wsj.com/article/SB1229030101...=googlenews_wsj

Madoff Charged With Securities Fraud

Bernard L. Madoff, the founder of Bernard L. Madoff Investment Securities and a fixture of the Wall Street trading world for decades, was arrested Thursday morning by Federal Bureau of Investigation agents and charged with criminal securities fraud by federal prosecutors in Manhattan.

The criminal complaint filed against Mr. Madoff alleges that he told senior employees Wednesday that his business was "a giant Ponzi scheme," according to a person familiar with the matter. The alleged scheme involved tens of billions of dollars, but the extent of investor losses wasn't immediately clear.

The disclosure came after Mr. Madoff tried to distribute early bonuses to employees of his firm, prompting questions by senior employees, a person familiar with the situation said.

Mr. Madoff, 70 years old, allegedly told employees he had a couple of hundred million dollars left and wanted to distribute it before turning himself in to authorities, this person said.

The Securities and Exchange Commission is expected to file parallel civil charges against Mr. Madoff.

Edited December 12, 2008 by lannarebirth

[flying]

Not to worry I am sure this is the only Ponzi scheme that exists on Wall Street

[Bisto]

he'd take down half the world with him.

Cough yes Cough again. Dont belive it look this is only the start.

[Misty]

he'd take down half the world with him.

Cough yes Cough again. Dont belive it look this is only the start.

Interesting link, Bisto...some more related:

So-called smart money figured his returns were due to insider trading:

http://clusterstock.alleyinsider.com/2008/...vested-with-him

Other fund managers glad his game is finally over ' "His returns were just too good to be honest," one asset manager told us.' :

http://clusterstock.alleyinsider.com/2008/...-madoffs-arrest

Unfortunately, these things do tend to snow-ball....

[lannarebirth]

he'd take down half the world with him.

Cough yes Cough again. Dont belive it look this is only the start.

Interesting link, Bisto...some more related:

So-called smart money figured his returns were due to insider trading:

http://clusterstock.alleyinsider.com/2008/...vested-with-him

Other fund managers glad his game is finally over ' "His returns were just too good to be honest," one asset manager told us.' :

http://clusterstock.alleyinsider.com/2008/...-madoffs-arrest

Unfortunately, these things do tend to snow-ball....

It's so good it deserved a post of its own:

Specifically, we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him.

For years and years I've heard people say that [bernie's] investment performance was too good to be true. The returns were too steady -- like GE earnings under Welch -- and too high given the supposed strategy.

One Madoff investor, himself a legend, told me that Madoff's performance "just doesn't make sense. The numbers can't be straight." Another sophisticated Madoff investor actually went through trade confirms in order to reverse-engineer the strategy and said, "it doesn't add up."

So why did these smart and skeptical investors keep investing? They, like many Madoff investors, assumed Madoff was somehow illegally trading on information from his market-making business for their benefit. They didn't consider the possibility that he was clean on that score but running a good old-fashioned Ponzi scheme

[ronz28]

Real audit procedures by a reputable audit firm and real due diligence by competent investment advisers would have uncovered this theft years ago. It costs some money to continuously perform due diligence on such investments but that's what it takes to avoid being cheated. Its amazing how much money has been lost in this Ponzi scheme. Since there were feeder funds all over the world to this crook, many more will probably be impacted by this fraud. US Securities and Exchange Commission needs new leadership and more auditors and lawyers to get control of this wild investment environment allowed by the SEC and the Fed....mainly Alan Greenspan. There are probably more cock roaches out there besides Madoff.

[CaptHaddock]

If it weren't for the current credit crisis, I'll bet this scam could have gone on for many more years. Probably unsuspecting investors,withdrawing funds because of their other losses, drained Madoff below the point where he could continue to rob Peter to pay Paul. It's touching that he made an effort to loot the last $200 or $300 million and distribute it to employees and family before giving up. I am pretty sure that he was not alone, that family members and others were actively engaged in criminal activity, and that he is trying to take the rap alone because he is 70 years old.

Edited December 14, 2008 by CaptHaddock

[cmsally]

There are names starting to crawl out of the woodwork, regarding who has invested in this.

On the BBC they were talking about HSBC & HBOS among others.

Meanwhile Ireland is very quietly giving its banking system a huge injection. Very sneakily done (not much news on it when you consider the headlines of other similar scenarios) trying not to attract anyones attention to the fact that its banking system needs a serious bailout.

[Journalist]

Madoff didn't have a custodian. It was all done in-house by a broker affiliate.

If he'd had a prime broker (like every other hedge fund does), this scam could not have happened.

[LaoPo]

Madoff’s ‘Lie’ Ensnares Victims From Paris to Tokyo

By Jon Menon and Charles Penty

Dec. 15 (Bloomberg) -- Bernard Madoff’s scam that allegedly cost investors $50 billion ensnared firms stretching from London to Paris to Tokyo.

HSBC Holdings Plc, Europe’s biggest bank, has $1 billion at risk after providing financing to funds that invested with Madoff, the London-based bank said today. Nomura Holdings Inc., Japan’s largest brokerage, has 27.5 billion yen ($302 million) of exposure to Madoff’s funds, while France’s BNP Paribas SA has as much as 350 million euros ($472 million) at risk, the banks said.

Madoff, 70, was arrested by federal prosecutors Dec. 11 and charged with operating what he told his sons was a long-running Ponzi scheme in the New York-based firm’s business advising rich people, hedge funds and institutions. He told senior employees that the firm was insolvent and “had been for years,” prosecutors said in the criminal complaint.

“A frothy market encourages slack oversight,” said Peter Hahn, a fellow in finance at London’s Cass Business School, in an interview today. “Whenever something like this happens, everyone who has been hit will comb through their investments.”

The Madoff collapse comes as banks and investment companies are reeling from falling asset prices and sputtering economies after the U.S. subprime mortgage market crash. Financial firms have reported almost $1 trillion of credit losses and writedowns since the start of 2007, data compiled by Bloomberg show.

‘Big Lie’

Madoff, who had advised the U.S. Securities and Exchange Commission on how to regulate markets, described his investment management operations as “one big lie,” prosecutors said. Investors have disclosed about $24 billion of investments in Madoff’s funds, according to data compiled by Bloomberg.

Ira “Ike” Sorkin, a lawyer at Dickstein Shapiro LLP in New York representing Madoff, didn’t reply to a phone call and e-mail seeking comment. Sorkin said on Dec. 13 that the situation was “a tragedy.”

BNP Paribas fell as much as 9.8 percent in Paris trading after reporting its Madoff exposure and suffering a setback in its plan to buy the Belgian operations of Fortis. The Brussels Court of Appeals ruled Dec. 12 that the sale of Fortis assets must be put to investors for a vote before Feb. 12. The court decision complicates BNP Paribas’s plan to complete the purchase quickly and preserve Fortis’s customer base.

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, said it may face up to 300 million euros in losses from the hedging of structured products linked to Madoff. BBVA acted for other financial institutions and investors to set up products linked to third-party funds that had invested in Madoff Investment Securities, the Bilbao, Spain-based lender said in a filing today to market regulators in Madrid. BBVA has no direct investments in Madoff.

‘Not to Blame’

Banco Santander SA, Europe’s second-biggest bank by market value, said yesterday its hedge fund unit invested 2.33 billion euros of client funds with Madoff. The bank’s Optimal Investment Services unit placed money with Madoff through its Optimal Strategic U.S. Equity fund, the Spanish lender said.

“It’s not Santander’s own money, and they’re not to blame, but of course it will be taken as something negative,” said Alberto Espelosin, who helps manage the equivalent of $7.7 billion at Zaragoza, Spain-based Ibercaja Gestion.

Santander dropped as much as 4.9 percent in Madrid trading today. Santander, based in the Spanish city of the same name, lost 53 percent of its market value this year. BBVA advanced 4 cents, or 0.5 percent, to 8.36 euros.

Royal Bank of Scotland Group Plc could lose as much as 400 million pounds ($601 million) on investments linked to Madoff. The U.K.’s second-largest bank, 58 percent owned by the government, had “exposure” through trading and collateralized lending to funds of hedge funds invested with Madoff, the Edinburgh-based bank said today.

Natixis, based in Paris, said today it has as much as 450 million euros of client funds invested with Madoff.

Man, HSBC

Man Group Plc, Europe’s largest publicly traded hedge-fund company, has about $360 million invested directly or indirectly in funds linked to Madoff. The investments in two Madoff funds represent 0.5 percent of Man’s total assets under management, the London-based company said in a Regulatory News Service statement.

The list of victims of the alleged scheme may also include real-estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, Senator Frank Lautenberg and a charity of movie director Steven Spielberg, the Wall Street Journal reported today, without saying where it got the information.

UniCredit SpA, Italy’s biggest bank, said it has 75 million euros of exposure to funds run by Madoff, the Milan-based lender said in a statement today. Its asset manager, Pioneer Investments, has some indirect risk related to Madoff through its alternative investments unit, and had “substantially all” of its $280 million Primeo Select Fund with Madoff, according to the unit’s Web site.

-Bloomberg

LaoPo

[IMA_FARANG]

Not to worry I am sure this is the only Ponzi scheme that exists on Wall Street

I hope you meant that to be a joke.

Did you ever notice how the Dow falls 100 points or so and then, before it closes the dow gows back up sharply, then drops further just before it closes for the day? Now, if someone had the funds, and his/her/their investment advice was respected enough, would it be possible for them to sell certain stocks short most of the day, then buy that stock back at a lower price before the final close to cover their days trade. That would make the Dow come back off it's low for the day...and if it was done right could make a decent profit for some well heeled and respected broker or brokerage firm.

Of course such a thing wouldnever happen...because all wall street investors are such reputable people aren't they.

Like Mr Madoff.

P.S. Just a snippet from an news report on the fraud:

Among the world's biggest banking institutions, Britain's HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura Holdings all reported that they had fallen victim to Madoff's alleged $50 billion Ponzi scheme.

Anybody recognise any of those names? A lot of International Exposure there. Wonder if there are any banks in Thailand (well, we won't count HSBC) that were involved? We shall proberly find out soon or not at all.

[misterman21]

Not to worry I am sure this is the only Ponzi scheme that exists on Wall Street

Not quite - although you won't find this info in the mainstream medai:

The arrest of financier Bernard Madoff Thursday for operating a "Ponzi scheme" costing investors $50 billion made the TV network news. Curiously, a lawsuit the same day against Clinton Treasury Secretary Robert Rubin for defrauding Citibank shareholders of more than $122 billion, also described as a "Ponzi scheme," got no airplay whatsoever.

[IMA_FARANG]

Excerts from the CNN newsarticle

For the whole article go to the link:

http://money.cnn.com/2008/12/15/news/newsm...sion=2008121508

Just an update and an idea of some of the losses that worldwide financial firms are eestimating they have incurred:

Some of the biggest and best-known names in global finance are calculating they may have lost nearly $3 billion in an alleged $50 billion "pyramid scheme" that led to the arrest of a New York financier last week.

HSBC, one of the world's largest banking groups, could lose $1 billion, it announced Monday. (In response to a Financial Times article that estimated they had lost less than that 1 billion,)

The Royal Bank of Scotland said its hedge funds had exposure of up to 400 million British pounds ($600 million) to funds managed by securities broker Bernard Madoff.

France's BNP Paribas said Sunday its maximum potential loss was about 350 million euros ($468 million).

That's a lot of funds. There are others too. Maybe other banks who still don't want to talk about it. At least not yet.

Edited December 15, 2008 by IMA_FARANG

[ronz28]

Some have pointed to Madoff’s use of Friehling & Horowitz as something that should have raised eyebrows. The accounting firm is run out of a 13-foot-by-18-foot storefront in an office plaza 30 miles north of Manhattan. The firm is said to employ just three people, a secretary, an active accountant and a partner in his late 70s who has long since retired to Florida. That said, firm namesake David Friehling—who has not been charged—is a former president and current board member of the Rockland County chapter of the New York State Society of Certified Public Accountants.

According to Bloomberg, an employee of a nearby office said that a man comes to the Friehling & Horowitz office for 10- to 15-minute periods and then leaves.

Apparently no million or billion dollar investors did enough due diligence to interview the Madoff's CPA firm to know that the firm wasn't doing sufficient audit procedures.

....And there is the SEC, I think the FBI should investigate the audit managers of the Securities and Exchange Commission and bring charges to jail those who ignored the whistle blowers who have been trying to get the SEC to act on complaints regarding Madoff. Audit managers that don't do their job missing billion dollar Ponzi schemes in order to collect a fat pay check and a big pension upon retirement aren't quite as guilty as Madoff but still deserve to be jailed.

[Mosha]

They are just discussing it on BBC. I love this quote from the world's richest man

"You only find out who has been swimming naked, when the tide goes out."

[OlRedEyes]

Maybe a Madoff rescue package is in order?

Seems he was just joining in the general ambiance set by the banks.....

[12DrinkMore]

Maybe that 50,000,000,000 Dollars (you have to put in ALL the zeros so you realise the amounts involved) were on the books when there was nothing left in the kitty. But the original entrants have been creaming in good rates (18% or so) since the scam was set up, so they will be laughing all the way to the, er, bank....

Nowadays we are talking about 1,000,000,000,000 (Trillions) of debt, so I guess the race is on for the first to defraud/default at that level Maybe the time is closer than you think.

Unbelievable.

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

[LaoPo]

Maybe that 50,000,000,000 Dollars (you have to put in ALL the zeros so you realise the amounts involved) were on the books when there was nothing left in the kitty. But the original entrants have been creaming in good rates (18% or so) since the scam was set up, so they will be laughing all the way to the, er, bank....

Nowadays we are talking about 1,000,000,000,000 (Trillions) of debt, so I guess the race is on for the first to defraud/default at that level Maybe the time is closer than you think.

Unbelievable.

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

That's a wrong conception.

The original investors lost all of their original money + interests because most of them didn't withdraw the money they initially invested.

The list with private investors and Banks, all over the world is growing and growing.

LaoPo

[12DrinkMore]

That's a wrong conception.

The original investors lost all of their original money + interests because most of them didn't withdraw the money they initially invested.

That cannot be right, because if, and so far I have not seen it mentioned in the press, the fund did not invest in anything else other than to pay "investors" in the Ponzi scam at 1-2%/month, then the money would have rapidly accumulated in the accounts of the original investors, and if not withdrawn, simply stayed there until today, leaving everything intact, but redistributed.

I strongly suspect that the "profits" were withdrawn and, doubtless it will come out in the wash, a few of Madoff's favourite clients had the tip off and have withdrawn their money over the last six months.

Although Madoff and his family doubtless made a fortune, they could hardly have taken the 50,000,000,000 for themselves.... or?

[flying]

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

Wealth is never destroyed just redistributed.

[bartender100]

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

Wealth is never destroyed just redistributed.

This was originally posted on another thread, thanks to OP, seems relevent to post here.

Sunday Times 14 Dec. 2008

I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around.

Everyone appeared to be drunk on naked hedonism. I’ve never seen so much jus being drizzled onto so many improbable things, none of which was potted herring. It was like Barcelona but with beer. And as I careered from bar to bar all I could think was: “Jesus. Can’t they see what’s coming?”

Ireland is tiny. Its population is smaller than New Zealand’s, so how could the Irish ever have generated the cash for so many trips to the hairdressers, so many lobsters and so many Rollers? And how, now, as they become the first country in Europe to go officially into recession, can they not see the financial meteorite coming? Why are they not all at home, singing mournful songs?

It’s the same story on this side of the Irish Sea, of course. We’re all still plunging hither and thither, guzzling wine and wondering what preposterously expensive electronic toys the children will want to smash on Christmas morning this year. We can’t see the meteorite coming either.

I think mainly this is because the government is not telling us the truth. It’s painting Gordon Brown as a global economic messiah and fiddling about with Vat, pretending that the coming recession will be bad. But that it can deal with it.

I don’t think it can. I have spoken to a couple of pretty senior bankers in the past couple of weeks and their story is rather different. They don’t refer to the looming problems as being like 1992 or even 1929. They talk about a total financial meltdown. They talk about the End of Days.

Already we are seeing household names disappearing from the high street and with them will go the suppliers whose names have only ever been visible behind the grime on motorway vans. The job losses will mount. And mount. And mount. And as they climb, the bad debt will put even more pressure on the banks until every single one of them stutters and fails.

The European banks took one hel_l of a battering when things went wrong in America. Imagine, then, how life will be when the crisis arrives on this side of the Atlantic. Small wonder one City figure of my acquaintance ordered three safes for his London house just last week.

Of course, you may imagine the government will simply step in and nationalise everything, but to do that, it will have to borrow. And when every government is doing the same thing, there simply won’t be enough cash in the global pot. You can forget Iceland. From what I gather, Spain has had it. Along with Italy, Ireland and very possibly the UK.

It is impossible for someone who scored a U in his economics A-level to grapple with the consequences of all this but I’m told that in simple terms money will cease to function as a meaningful commodity. The binary dots and dashes that fuel the entire system will flicker and die. And without money there will be no business. No means of selling goods. No means of transporting them. No means of making them in the first place even. That’s why another friend of mine has recently sold his London house and bought somewhere in the country . . . with a kitchen garden.

These, as I see them, are the facts. Planet Earth thought it had £10. But it turns out we had only £2. Which means everyone must lose 80% of their wealth. And that’s going to be a problem if you were living on the breadline beforehand.

Eventually, of course, the system will reboot itself, but for a while there will be absolute chaos: riots, lynchings, starvation. It’ll be a world without power or fuel, and with no fuel there’s no way the modern agricultural system can be maintained. Which means there will be no food either. You might like to stop and think about that for a while.

[cobra]

Not to worry I am sure this is the only Ponzi scheme that exists on Wall Street

Scratch the surface and it's always been a house of cards, any illusion of stability is simply a function on how well the books are cooked,

As long as we're making money, how easily we're called away,

[flying]

Not to worry I am sure this is the only Ponzi scheme that exists on Wall Street

Scratch the surface and it's always been a house of cards, any illusion of stability is simply a function on how well the books are cooked,

As long as we're making money, how easily we're called away,

You know I am so cynical these days that I would not be surprised at all if this was all a set up too.

Meaning there was a ponzi purpose & all the investors are in on it.

[Thai at Heart]

Story on CNBC yesterday that people who got paid out in the will have to return it and prove that they DIDN'T know about the fraud.

I bet that will make a few pucker up quickly when the court cases start flying. Anyone attached to this scheme is going to be tied up in court for ever.

[flying]

I also saw on CNBC this morning some lady who had millions invested.

She was not worried as she had her eggs in many baskets but she also said a silver lining was the IRS owed her money.

Seems she paid taxes on income that was never there in a sense. That alone is a nightmare to sort for the IRS I bet

[Brigante7]

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

Wealth is never destroyed just redistributed.

This was originally posted on another thread, thanks to OP, seems relevent to post here.

Sunday Times 14 Dec. 2008

I was in Dublin last weekend, and had a very real sense I'd been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that's now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it's the other way around.

Everyone appeared to be drunk on naked hedonism. I've never seen so much jus being drizzled onto so many improbable things, none of which was potted herring. It was like Barcelona but with beer. And as I careered from bar to bar all I could think was: "Jesus. Can't they see what's coming?"

Ireland is tiny. Its population is smaller than New Zealand's, so how could the Irish ever have generated the cash for so many trips to the hairdressers, so many lobsters and so many Rollers? And how, now, as they become the first country in Europe to go officially into recession, can they not see the financial meteorite coming? Why are they not all at home, singing mournful songs?

It's the same story on this side of the Irish Sea, of course. We're all still plunging hither and thither, guzzling wine and wondering what preposterously expensive electronic toys the children will want to smash on Christmas morning this year. We can't see the meteorite coming either.

I think mainly this is because the government is not telling us the truth. It's painting Gordon Brown as a global economic messiah and fiddling about with Vat, pretending that the coming recession will be bad. But that it can deal with it.

I don't think it can. I have spoken to a couple of pretty senior bankers in the past couple of weeks and their story is rather different. They don't refer to the looming problems as being like 1992 or even 1929. They talk about a total financial meltdown. They talk about the End of Days.

Already we are seeing household names disappearing from the high street and with them will go the suppliers whose names have only ever been visible behind the grime on motorway vans. The job losses will mount. And mount. And mount. And as they climb, the bad debt will put even more pressure on the banks until every single one of them stutters and fails.

The European banks took one hel_l of a battering when things went wrong in America. Imagine, then, how life will be when the crisis arrives on this side of the Atlantic. Small wonder one City figure of my acquaintance ordered three safes for his London house just last week.

Of course, you may imagine the government will simply step in and nationalise everything, but to do that, it will have to borrow. And when every government is doing the same thing, there simply won't be enough cash in the global pot. You can forget Iceland. From what I gather, Spain has had it. Along with Italy, Ireland and very possibly the UK.

It is impossible for someone who scored a U in his economics A-level to grapple with the consequences of all this but I'm told that in simple terms money will cease to function as a meaningful commodity. The binary dots and dashes that fuel the entire system will flicker and die. And without money there will be no business. No means of selling goods. No means of transporting them. No means of making them in the first place even. That's why another friend of mine has recently sold his London house and bought somewhere in the country . . . with a kitchen garden.

These, as I see them, are the facts. Planet Earth thought it had £10. But it turns out we had only £2. Which means everyone must lose 80% of their wealth. And that's going to be a problem if you were living on the breadline beforehand.

Eventually, of course, the system will reboot itself, but for a while there will be absolute chaos: riots, lynchings, starvation. It'll be a world without power or fuel, and with no fuel there's no way the modern agricultural system can be maintained. Which means there will be no food either. You might like to stop and think about that for a while.

A right cheery soul if ever there was one, fuc_k me, I might as well end it all now.

[12DrinkMore]

Anybody who doesn't realise that we are deep in trouble is still in denial.

The figures of debt that are bandied around are just too massive. Ireland would have been another Iceland but for two simple reasons, firstly the government came out very quickly with a statement saying that all depositors will be protected and secondly they have moved to the Euro. If they had stayed on the Punt it would have been destroyed by now.

Since governments moved currencies away from metal they have only been worth the promise of a government to pay up. And if they don't have the cash, then they can run the printing presses. Then came along the fractional banking Ponzi scheme, enabling the banks to generate a further 900% of Vapourwealth instantly in the form of debt.

And now all this Vapourwealth is disappearing back to where it came from, nowhere.

[OlRedEyes]

Once this mess is over, I wonder just how much "real wealth" is in the world and what it will be measured in?

Wealth is never destroyed just redistributed.

And there I wuz measuring my wealth by the number of chicks I got. I thought wealth grows old